Prosecution for fraud against the founder of Celsius – What the indictment says

The New York State Attorney General filed a lawsuit against Celsius co-founder Alex Mashinsky for misleading investors and causing them to suffer great losses.

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After Sam Bankman Fried, the founder of the bankrupt cryptocurrency exchange FTX, who is accused of multi-billion dollar fraud against his customers, another former head of a major crypto company is being prosecuted for similar offences.

This time is Alex Mashinsky, the co-founder of the bankrupt crypto bank, Celsius Network, against whom the New York District Attorney, Letitia James, filed a lawsuit for misleading investors, which resulted in them suffering great losses.

He concealed the losses from the investments

According to the indictment, 57-year-old Mashinsky, who described himself as a modern-day Robin Hood, falsely promoted the image of Celsius as a safe alternative to banks while concealing hundreds of dollars in losses from risky investments of investors’ deposits.

The lawsuit brought by James is another blow to the crypto sector, which has been rocked by the allegations against Bankman-Freed.

Mashinsky’s path

Mashinsky, a Ukrainian native whose family immigrated to Israel, decided to move to New York after a trip there in 1988.

Prosecution for fraud against the founder of Celsius - What the indictment says
Alex Mashinsky

Since then, he has founded eight companies and in 2017, he entered the crypto space when his venture fund, Governing Dynamics, was joined by blockchain company, MicroMoney, as a strategic partner. In the same year, he went on to found Celsius.

In his younger days, Mashinsky was buying confiscated goods from auctions at Israel’s Ben Gurion airport and reselling them for a profit.

Mashinsky managed to raise more than $1.5 billion to set up several companies, which generated more than $3 billion when he and other investors sold them, according to his website, which also notes that he has more than 50 patents.

Promising 17% returns

Celsius promised investors returns of up to 17%, among the highest in the crypto industry. “We take it from the rich,” he allegedly stated, according to the indictment.

By early 2022, he had raised $20 billion in digital assets from investors, but his company was struggling to generate enough revenue to pay the promised returns, leading him to make much riskier investments, according to the indictment.

Celsius made hundreds of millions of dollars in unsecured loans and invested hundreds of millions of dollars in unregulated decentralized financing platforms.

Mashinsky, who wore T-shirts with slogans such as “Banks are not your friends,” continued to mislead investors that Celsius allegedly had high returns through low-risk investments, the New York attorney general’s lawsuit says.

Celsius filed for bankruptcy on July 13 under Article 11 of the Bankruptcy Code for protection from creditors, recording a $1.19 billion deficit on its balance sheet.

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